FLSA Reclassification From “Exempt” to “Non-exempt”
WHAT DOES IT REALLY MEAN WHEN YOUR JOB IS BEING “RECLASSIFIED”:
- Your employer has decided that it has been improperly classifying you as “exempt” and not entitled to overtime pay when it should have been classifying you as “non-exempt” and paying you time and a half for all hours over 40 per week, and
- You are probably owed back pay for all of your unpaid overtime during the past 2-3 years.
With the significant increase in multi-million dollar lawsuits against companies who fail to pay their employees overtime in accordance with state and federal labor laws, many employers are being motivated to take a serious look at their overtime pay practices. Often, they make the unpleasant discovery that their pay practices are not in compliance with state and/or federal labor laws.
FLSA Reclassification From “Non-exempt” to “Exempt”
Although less common, another reclassification scenario to watch out for is when your job is changed from “non-exempt” to “exempt” – resulting in an end to overtime pay that you had been receiving. A recent class action case against insurance giant MetLife is a good example of this.
MetLife Reclassification Case
MetLife reclassified hundreds of long-term disability claims specialists as “exempt” and stopped paying them overtime pay. Previously, they had been paid hourly wages plus overtime. The workers in this case claim that MetLife’s improper classification scheme resulted in denial of more than $50 million in earned overtime pay to claims specialists going back to 2013.
What Can The Employer Do?
Once an employer comes to the realization that it has been misclassifying “non-exempt” employees as “exempt” employees, and not paying them 1.5 times their normal pay rate if they work over 40 hours per week, it faces the decision as to what to do about the problem.
The choices include:
- Do nothing and continue violating the law until they are caught and forced to deal with it.
- “Reclassify” the jobs and begin paying overtime, but say/do nothing about past overtime owed.
- “Reclassify” the jobs and begin paying overtime, and offer employees compensation for past overtime owed.
This is a dilemma faced by companies ranging from “mom and pops” all the way to some of the largest in the world – like BP, Bechtel, Halliburton, Baker Hughes, Schlumberger, Shell / Motiva, etc. Unfortunately for workers, the vast majority of employers will opt for one of the first two choices, as the third, although honest and right, tends to be very expensive. Some simple math illustrates how failing to pay a group of employees proper overtime can come with a serious cost.
An Example of the “Cost” of Reclassifying Employees
A class of “non-exempt” oilfield workers (eg MWD/LWDs, Operators, Drillsite / Wellsite Managers, Completion Consultants, Mud Loggers, Well Testers…) are paid using a day rate but are not paid overtime. The typical day rate is $400 per day and the typical work schedule is 12 hours per day, 14 on 7 off. So, for each week worked, they are paid $2,800 for 84 hours of work or $33.33 per hour. Since they are paid a day rate, they are entitled to an additional one-half of their regular rate of $33.33 for each of the 44 hours over 40, which is an additional $733 per week worked. Assuming 36 weeks worked per year, a single worker would be owed $26,405 per year in back wages.
per year! But wait…
Applying the shorter 2 year statute of limitations,
But even this number is subject to potential doubling for liquidated damages.
Bringing the total exposure to:
for the employer.
Now multiply this by 200, 400 or 2,000 misclassified employees and you can see how large an issue this becomes.
This tends to explain why employers try to present a planned reclassification in a way they hope doesn’t set off alarm bells in employees’ heads, causing them to seek out legal advice as to their overtime pay rights regarding the reclassification. If they succeed and keep employees from discovering their rights and taking timely action, the payoff is huge – saving the company from having to repay its’ workers for millions of dollars in back wages.
Once the statute of limitations has passed, the employer is, literally, home free…and the reclassified workers are SOL and their pay is now changed from day rate to hourly pay.
What Should I Do if I’m Being Reclassified?
If your employer has recently changed your job classification from “non-exempt” to “exempt” and started paying you overtime if you work over 40 hours per week, you are probably owed back pay for all of your unpaid overtime during the past 2-3 years. Call 1-866-559-0400, email [email protected] or submit your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances – because time is money.